Rebate checks to stimulate economy

By Andrew Denney
Feb. 19, 2008

The Economic Stimulus Act of 2008, signed into law last week by President George Bush after sweeping bi-partisan approval from Congress, could provide a boost to a slowing economy by putting extra cash in Americans’ pockets.

The act will provide extra tax rebates that will be sent out in May and hinges on Americans reinvesting the funds back into the economy.

Some experts have criticized the $168 billion plan, saying a vast, global economy such as that of the United States would not see lasting change from such legislative intervention. State lawmakers have claimed that state tax revenues might fall as a result of some the bill’s provisions regarding businesses.

In a brief speech on Feb. 13 before Bush signed the bill, he praised the efforts of Washington lawmakers and called the legislation a “booster shot” for the economy.

“In a dynamic market economy there will always be a time where we experience uncertainties and fluctuations,” Bush said. “But so long as we pursue pro-growth policies that put our faith in the American people, our economy will prosper and it will continue to be the marvel of the world.”

The bill will give taxpayers that had incomes between $3,000 and $75,000 rebates of as much as $600 and no less than $300. Students older than 17 that are claimed as dependents on their parents’ tax forms will not be eligible for a rebate.

Couples filing joint returns that made less than $150,000 will receive $1,200. Parents will receive a $300 tax credit for children under 17, and there is no limit on how many children can be claimed.

The bill also allows the government to more closely regulate the housing market, which because of last year’s subprime mortgage crisis is seen as a huge catalyst behind the economic slowdown. The bill grants additional authority to the U.S. Department of Housing and Urban Development to raise housing loan limits.

The bill offers stimuli to aid businesses, such as additional tax credits for equipment and software that businesses claim as deductible expenses on their returns.

MU economics professor Joseph Haslag said the bill, which sped through legislative process in less than four weeks, is politically beneficial -especially during an election year, when it could be detrimental for a public official to be associated with a shrinking economy. But he said government policy is too blunt to influence the business cycles of the complex U.S. economy.

“The things that influence business cycles are largely out of the hands of policy makers,” Haslag said. “You just can’t time policy tools being applied to business cycle activity.”

The bill states that Congress will figure the cost of the rebates into the 2008 budget, which Haslag said would cause a tax increase for taxpayers or more borrowing from the government in the future to cover costs.

Rep. Ed Robb, D-Columbia, said the bill’s provisions regarding business would reduce the amount of state tax revenue coming into the state’s coffers.

“I think if they wanted to put together a stimulus plan they could have done a much better job with it,” Robb said.

Mizzou College Republicans vice president Marcus Bowen said the organization hasn’t discussed the bill, and that he hasn’t seen much interest in the bill by students.

“I think economic stimulus is important,” Bowen said. “But these packages are a lot of talk.”

Like Haslag, Bowen said he thinks the bill is the product of election year rhetoric from politicians.

Haslag said perceptions on the state of the economy by the media, namely talks of an impending recession, might have been overdrawn.

“Crisis is a really sexy word,” Haslag said. “We’re not going from a $14 trillion economy to a $7 trillion economy, or even to a $10 trillion economy.”

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